The Tax Exempt and Government Entities Division’s Toll-Free
Call Site Accuracy Rate and the Effectiveness and Efficiency of Call Site
Operations Can Be Improved

September 2005

Reference Number: 2005-10-166

This report has cleared the Treasury
Inspector General for Tax Administration disclosure review process and
information determined to be restricted from public release has been redacted
from this document.

September
27, 2005

MEMORANDUM FOR
COMMISSIONER, TAX EXEMPT AND GOVERNMENT ENTITIES DIVISION

FROM:Pamela J. Gardiner
/s/ Pamela J. Gardiner

Deputy
Inspector General for Audit

SUBJECT:Final Audit Report - The
Tax Exempt and Government Entities Division’s Toll-Free Call Site Accuracy Rate
and the Effectiveness and Efficiency of Call Site Operations Can Be Improved (Audit # 200510005)

In summary, the CAS QAfunction
correctly reported all instances of improper disclosure and most instances
(99.32 percent) of improper employee identification. However, the customer accuracy rate for this
period was overstated by approximately 6.1 percent (78.52 percent reported
by the TE/GE Division CASQA function versus 72.39
percent determined by our review).For the additional five inaccurate responses we
identified, the TE/GE Division CSRs did not follow
established procedures or made statements that conflicted with written
guidance.One significant difference
between the TE/GE Division CAS QA function’s review and our review was the
method of listening to the sample of telephone calls.The TE/GE Division CAS QA function reviewed
live calls; we reviewed the same calls using the contact recording system,
which is an automated recording system used widely in private industry to
monitor customer contacts.This
technology enabled us to review the telephone calls several times to ensure we
considered all of the questions and responses and to provide us the opportunity
to research TE/GE Division CAS function procedures and Internal Revenue Service
(IRS) publications for correct responses.

We also determined that CSRs
could have provided enhanced customer service to the callers for seven
additional telephone calls.These seven telephone
calls do not affect the accuracy rates but present an opportunity for the TE/GE
Division CAS function to improve service to customers.

Additional actions are also needed
to increase the effectiveness and efficiency of the TE/GE Division CAS
toll-free call site operations.Specifically, we determined the TE/GE Division CAS function should:

·Compare the
actual sample results to the sampling objectives shortly after the sampling
period has ended to determine if adjustments to the sampling plans are needed.

·Ensure issue
codes for customers’ telephone inquiries are entered on the Aspect[1] system.

We recommended the Director, CAS,
TE/GE Division, establish procedures for using contact recordings in the QA
process; ensure the draft probe and response job aid for responding to customers’ inquiries about how to apply for
tax-exempt status under Internal Revenue Code (I.R.C.) Section (§) 501(c)(3)[2]addresses
the types of questions weidentified for which enhanced customer
service can be provided; and implement a process for developing probe and
response guides that address the common types of customers’ questions.We also recommended the Director, CAS, TE/GE Division, establish
a coordinated process with the IRS Statistics of Income Division to compare the
actual sample results to the sampling objectives shortly after the sampling
period has ended, ensure issue codes are entered, evaluate the customer
satisfaction survey results, develop action plans to improveservice to customers, and monitor whether the changes resulted in
improved customer satisfaction.

Management’s Response:The
Commissioner, TE/GE Division, agreed with the findings and recommendations in
the report.The Director, CAS, TE/GE
Division, worked with the Statistics of Income Division contacts to develop a
method to use contact recording beginning October 1, 2005.The Director, CAS, TE/GE Division, has also
developed and shared
with employees a job aid for responding to
customer’s inquiries about how to obtain recognition of tax-exempt
status under I.R.C. § 501(c)(3), and in April 2005, an analyst was detailed to the QA function to analyze data and target topics
for providing job aids.In addition, the
Director, CAS, TE/GE Division, will coordinate monthly with the Statistics of
Income Division to compare actual sample results with sampling objectives to
determine if adjustments are needed to the sample size.TE/GE
Division CAS function managers will reemphasize
the input of issue codes.The Director,
CAS, has
revised the scheduling of employee direct time and implemented new menu options
on the toll-free line to respond to customer satisfaction results.As an ongoing initiative, the CAS function
forwards suggestions for topics or additional information to be put on the web
(irs.gov) for enhancing web usage, and uses customer satisfaction results
during workshops and in the development of the annual training plan.Management’s
complete response to the draft report is included as Appendix V.

Copies of this report are also being sent to the IRS managers who are
affected by the report recommendations. Please
contact me at (202) 622-6510 if you have questions or Daniel R. Devlin,
Assistant Inspector General for Audit (Headquarters Operations and Exempt
Organizations Programs), at (202) 622-8500.

The Tax Exempt and Government Entities (TE/GE) Division’s mission is to
provide customers top-quality services by helping them understand and comply
with applicable tax laws and to protect the public interest by applying the tax
law with integrity and fairness to all.The TE/GE Division Customer Account Services (CAS) function assists customers
of the Employee Plans (EP), Exempt Organizations (EO), and Government Entities
(GE) functions and oversees the processing of TE/GE Division customer returns.Toll-free telephone assistance is provided to
TE/GE Division customers nationwide through the TE/GE Division CAS toll-free call
site in Cincinnati, Ohio.

·Confirmation
of the status of an application, including an Application for Recognition of
Exemption Under Section 501(c)(3) of the Internal Revenue Code (Form 1023), an Application
for Recognition of Exemption Under Section 501(a) (Form 1024), or an Application
for Determination for Employee Benefit Plan (Form 5300).

·A determination
letter issued by the Internal Revenue Service (IRS) that an exempt
organization’s application and supporting documents establish that it qualifies
for tax-exempt status or that an employee plan’sterms
conform to the requirements of Internal Revenue Code (I.R.C.) Section (§) 401(a).[3]

·Answers to
miscellaneous EO, EP, and GE function questions.These questions commonly include issues such
as requests to confirm tax exempt status, requests for guidance on the filing of
EP and EO returns, questions resulting from notices and letters received by
customers on issues related to an EP or EO return, and requests for guidance on
entity changes.

·To speak to
a TE/GE Division agent in another office regarding a pending determination
application.

·Identify errors
that occurred in responding to customers’ telephone calls.

·Analyze the
reasons the errors occurred.

·Identify and
evaluate any error trends.

In addition, the TE/GE
Division CAS QA function initiates corrective action to eliminate the cause of
the error and follows up to ensure the corrective action was effective.

At
the time of our review, the TE/GE Division CAS QA function conducted quality
reviews by manually selecting sample telephone calls and evaluating the calls
while they occurred.The telephone
calls were selected to achieve a statistically valid sample based on a schedule
developed by the IRS Statistics of Income (SOI) Division.The sample is designed with a 90 percent
confidence level, a precision of +5 percent, and an expected error rate
not to exceed 10 percent.

At the start of FY 2005,
the CAS QA function implemented the Embedded Quality (EQ) effort to evaluate
the quality of services provided to customers.The EQ measures are calculated based on the percentage of items
addressed correctly within each of five elements:Customer Accuracy, Regulatory Accuracy,
Procedural Accuracy, Professionalism, and Timeliness. The elements are defined as follows:

Customer Accuracy is giving the correct
answer with the correct resolution.“Correct” is measured based upon the taxpayer receiving a correct
response or resolution to his or her case or issue, and if appropriate, whether
the assistor took the necessary case actions or case disposition to
provide this response or resolution.

Regulatory Accuracy is adhering to statutory
or regulatory process requirements when making decisions on taxpayer
accounts or cases.

Procedural Accuracy is adhering to internal
process requirements that are not required by statute or regulation.

Professionalism is promoting a positive
image of the IRS by using effective communication techniques.

Timeliness is resolving an issue most
efficiently using proper workload management and time use techniques.

The results of the TE/GE Division CAS QA function case
analysis are documented on electronic review sheets called Data Collection
Instruments and input to the IRS National Quality Review System.Our review focused on twoof the five elements, Customer Accuracy and
Regulatory Accuracy (for the two aspects Proper Disclosure and Employee
Identification).

This review was performed at the TE/GE Division CAS toll-free
call site in Cincinnati, Ohio, in the CAS QA function during the
period December 2004 through June 2005.The
audit was conducted in accordance with Government
Auditing Standards.Detailed information on our audit
objectives, scope, and methodology is presented in Appendix I.Major contributors to the report are listed
in Appendix II.

Based on analysis of the telephone
calls reviewed by the TE/GE Division CAS QA function during the period November
2004 through January 2005, we determined the TE/GE Division CAS QA function
correctly reported all instances of improper disclosure, most instances (99.32
percent) of improper employee identification, and that Customer Service
Representatives (CSR) used clear and appropriate language when responding to
customers’ telephone inquiries.However,
the customer accuracy rate reported for this period was overstated by
approximately 6.1 percent (78.52 percent reported by the TE/GE Division CAS
QA function versus 72.39 percent determined by our review; see Figure 1). The
customer accuracy rate is a key method used to determine whether the TE/GE
Division CAS toll-free call site is providing quality service to
customers.For seven additional
telephone calls, we determined CSRs could have provided enhanced customer
service to callers.These seven calls do
not affect the accuracy rates but present an opportunity for the TE/GE Division
CAS function toimprove service to customers.

In addition to the accuracy
rates, we determined improvements are needed to increase the effectiveness and
efficiency of the TE/GE Division CAS toll-free call site operations.Specifically, the TE/GE Division CAS function
should:

·Compare the actual sample results to the sampling
objectives shortly after the sampling period has ended to determine if adjustments
to the sampling plans are needed.

·Ensure issue codes for customers’ telephone
inquiries are entered on the Aspect system.[5]

The five additional calls involved
three EO function customers inquiring about their tax-exempt status, one EO function
customer inquiring about what activities an organization can engage in prior to
receiving a formal determination of tax-exempt status, and one EP function customer
inquiring about abatement of a proposed penalty.In each of the five instances, the TE/GE
Division CAS function CSRs did not follow established procedures or made
statements that conflicted with written guidance.We could not determine why the TE/GE Division
CAS QA function did not identify these additional five calls; however, we
believe if it was conducting its reviews using recorded calls instead of live
calls, it would have had the
opportunity to review each call several times and to stop a call if it
needed toresearch a technical issue.These 5 calls averaged 5.2 minutes in length,
and 1of the 5 contained morethan 1 question by the caller.In addition, the TE/GE Division CAS QA
function reviews many other attributes to determine if the telephone call is
answered in compliance with regulatory statutes and internal procedures. These factors
contributed to the TE/GE Division CAS QA function’s difficulty in reviewing
live calls.

One significant difference between the TE/GE Division CAS QA
function’s review and our review was the method of listening to the sample of
telephone calls.The TE/GE Division CAS
QA function reviewed live calls; we reviewed 134 of the 149 calls review by the
QA function using the contact recording system, which is an automated recording
system used widely in private industry to monitor customer contacts.In October 2004, the TE/GE Division CAS function
started to use this system to record all customer calls answered.The contact recording software records the
actual call, including the caller’s questions, the CAS assistor’s responses,
and any time the caller is placed on hold.This technology enabled us to review the telephone calls several times
to ensure we considered all of the questions and responses and allowed us to
research TE/GE Division CAS function procedures and IRS publications for
correct responses.TE/GE Division CAS
function management advised us they are planning touse
contact recording for the QA function beginning in the summer of 2005; they had
not prepared any procedures at the time of our review.

CSRs can provide
enhanced customer service to callers

For an
additional 7 of the 148 (4.7 percent) telephone calls we reviewed, the CSRs
provided accurate responses to customers but could have providedenhanced service and reduced taxpayer burden.These seven calls included the
following:

Five telephone calls
involved questions about how to become a tax-exempt organization and when tax-deductible
contributions could be received.The CSRs could have provided enhanced service by more closely
following published guidance when explaining the process for applying for
recognition of tax-exempt status.

One telephone call
involved a question about whether an affiliated organization was included
in the tax exemption of the national organization.The CSR could have provided enhanced
servicebyresearching
IRS records to determine if the national organization had a group
exemption instead of instructing the caller to check with the national
organization about a group exemption.

One telephone call
involved a question about commercial software used to file some EO function
returns.The CSR could have
provided enhanced service if clearer guidance existed about the software
referred to on the IRS web site, IRS.gov.

The
five customers calling for tax-exempt status did not appear to know the tax law
regarding I.R.C. § 501(c)(3).[12]IRS publications advise that most
organizations wanting to be recognized by the IRS as an I.R.C. § 501(c)(3)
public charity or private foundation must file a Form 1023 within 15 months of
their creation.[13]The TE/GE Division CAS function CSRs’
responses were technically correct in that a tax-exempt organization must file an
application to receive a ruling or determination letter from the IRS
recognizing its tax-exempt status.However, a customer may misunderstand that all tax-exempt organizations
are required to immediately file the application and that the organization
cannot conduct any activities until a determination is received, which may
increase the burden on the organization.The TE/GE Division believes it is important for customers to realize
that, until the IRS determines an organization is exempt from Federal income
tax under I.R.C. § 501(c)(3), potential contributors do not have assurance that
contributions to that organization will be tax deductible.We believe explaining when to file the Form
1023 and which organizations are not required to file may help to reduce
taxpayer burden for between 1,290 and 8,017[14]
TE/GE Division EO function customers.

One tool that would benefit TE/GE Division CAS
function CSRs in responding to customers consistently and timely is a probe and
response guide, which would allow assistors to research and respond to common
questions from customers.Similar guides
were developed and used by other IRS toll-free telephone call sites starting in
1993.The guides were created to be a
simple, easy-to-use tool to guide CSRs through
the IRS’ complex maze of tax laws, rules, and procedures.They were designed to enable CSRs to perform their
duties more precisely, correctly, and efficiently.The guides were also designed to help eliminate
errors made by CSRs, as identified by managerial and quality reviewers.

In June
2000 (shortly after the TE/GE Division was created), we reported[15]
that the TE/GE Division did not have sufficient guidelines to assist CSRs in
responding to customer inquiries.We
recommended the Commissioner, TE/GE
Division, improve the quality of customer service by completing guidelines for
CSRs to use when responding to customers.In response to that report the Director, CAS, TE/GE Division,
responded that the QA function staff
for the TE/GE Division’s CAS call site will improve the desk guide and develop
guidelines and other job aids similar to those used at other IRS division call sites.During our current audit, TE/GE Division CAS
function management advised us they started developing probe and response job
aids at the beginning of FY 2003 and had developed job aids covering seven
topics, which have been provided to the TE/GE CSRs to answer customer
inquiries. The TE/GE Division CAS
function management recognized the need to develop other job aids for their
CSRs.In addition, the TE/GE CAS QA
function started developing a draft guide to address a trend we identified early
in our review regarding customers’ inquiries about applying for 501(c)(3) exempt
organization status.At the time of our
review, the draft guide had not been released to the assistors.

Completing the implementation of contact recording processes
and developing the necessary probe and response guides for TE/GE Division CAS function
assistors will enable the TE/GE Division CAS toll-free call site to improve the
accuracy of responses to customers’ telephone inquiries.

Management’s Response:The Director, CAS, TE/GE Division, worked directly with the established SOI Division
contacts to develop a method to use contact recording and apply both a random
start and random sampling for TE/GE CAS reviews of telephone contacts for the
beginning of FY 2006.

2.The Director, CAS, TE/GE Division, should
ensure the draftprobe and response job aid,
for responding to customers’ inquiries about how to apply for tax-exempt status
under I.R.C. § 501(c)(3), addresses the types of questions weidentified for which enhanced customer service can
be provided.

Management’s
Response:The Director, CAS, TE/GE Division, developed and shared with employees in August 2005 the probe and response
guide (job aid) for tax‑exempt application inquiries.The job aid includes information on how to
obtain recognition of tax-exempt status, and which forms and publications are
used by different organizations.

3.The
Director, CAS, TE/GE Division, should implement a process for developing
probe and response guides that address the common types of questions customers
have.

Management’s Response:The
Director, CAS, TE/GE Division, has developed several probe and response guides
to address the common types of questions customers have.The development of these job aids has been
and will continue to be an ongoing process.In April 2005, a former systems analyst was detailed
indefinitely to the Quality staff to analyze all available data, target topics
for providing job aids, and improve overall quality of work and work processes.

We determined additional actions are
needed to increase the effectiveness and efficiency of the TE/GE Division CAS
toll-free call site operations.Specifically,
the TE/GE Division CAS function should reevaluate the sample size needed for QA
function review to determine if a smaller sample is justified.This could result in more efficient use of
resources as TE/GE Division CAS QA function reviewers may be able to review
fewer telephone calls.In addition, issue codes indicating the type of customer calling
and the topic of the call should be input to the system for all closed
telephone calls to enable TE/GE Division CAS function management to identify
trends in customers’ telephone inquiries.Finally, the TE/GE Division CAS QA function should develop action plans
to implement program improvements indicated by customer satisfaction surveys and
monitor whether the changes resulted in improved customer satisfaction.

Actual
sample results should be periodically compared to the sampling objectives

The TE/GE Division CAS QA function
does not compare the actual sample results to the sampling objectives shortly
after the sampling period has ended.Thus,
TE/GE Division CAS function management is unable to determine if the sample
size should be reevaluated. When
conducting a statistical sample, it is necessary to make an assumption as to
the rate of occurrence of errors in the population.Since the actual results of a sample will
normally differ from the initial assumptions, it is essential that the sample
results are appraised after the sampling is completed to determine if the
sample results can be projected to the population with the same estimated
sampling precision (e.g., +5 percent). The TE/GE Division CAS function management
relies on the IRS SOI Division for statistical sampling advice and was not
aware that a sample needs to be reevaluated after the results are determined.

For example, the TE/GE Division CAS function samples for FYs
2004 and 2005 are based on an expected occurrence rate (error rate) of 10
percent, a 90 percent confidence level, and a sampling precision of +5 percent.During FY 2004, the actual error rates
reported by the TE/GE Division CAS QA function ranged from 5.9 to 13.0
percent.Using the reported TE/GE Division
telephone customer quality ratings to appraise the sample results, we
determined the actual sample precision obtained ranged from 3.52 to 4.91
percent, with an average of 4.12 percent for FY 2004.This is well below the precision rate of +5
percent the TE/GE Division CAS function had established. With a smaller error rate, fewer cases would
have to be sampled to still maintain the precision rate of +5
percent.We estimate that, if the TE/GE
Division CAS QA function had reevaluated the sample size in FY 2004 in light of
the prior month’s error rate, it could have reviewed 360 (20 percent) fewer
cases, which could have provided resources for other TE/GE Division CAS function
programs.

Conversely, for the 3-month period November 1, 2004, through January 31, 2005, the actual error rate was
greater than the expected error rate, resulting in a sample precision of +5.85
percent.Because the sample precision
exceeded the established 5 percent by almost an entire percentage point, the
usefulness of the information to TE/GE Division management may be
diminished.In this instance, a larger
sample would have to be taken to maintain the desired precision level.Appraising the sample results provides
essential information about whether the sampling plan is achieving its
objectives and whether resources are being effectively used.Our discussions with IRS SOI Division personnel
indicated they agree actual precision rates should be computed after the end of
a sampling period.

The TE/GE Division CAS function established issue codes to be
able to trend the different types of customer inquiries.This assists TE/GE Division CAS function management
in identifying new or frequent customer inquiries (which could be an indicator
of the need for additional training) as well as other types of problems, such
as erroneous notices generated by TE/GE Division customer returns
processing.Examples of the different
issue codes include one code that is used when an EO function customer calls about the status of its Form 1023 and a
different code that is used when an EO function customer calls about a penalty
notice.Although TE/GE Division CAS function procedures
instruct the assistor to input to the Aspect system the issue code most applicable to
the call when closing a
telephone call, issue codes are frequently not entered since the entering of
issue codes is not part of the quality review evaluation process for CSRs. In FY 2004, 102,665 (21.27 percent) of the
TE/GE Division customer telephone inquiries were not coded for an issue.This problem continued in the first quarter
of FY 2005, with 39,461 (31.35 percent) of the TE/GE Division customer
telephone inquiries not having an issue code.

The correct and consistent use of issue
codes is important to gauge the impact of events on the TE/GE Division CAS
toll-free call site operations.For
example, on Friday, October 22, 2004, numerous notices were sent out to
various tax-exempt organizations.By
Monday, October 25, 2004, the TE/GE Division CAS function had added two new
issue codes to assess the impact of these notices on TE/GE Division CAS
toll-free call site operations.In FY
2004, all EO function customer telephone inquiries regarding a notice inquiring
about filing a return were coded under a single issue code.In October 2004, EO function customers
calling about the same notice were separated into two issue codes–one for
customers receiving a first notice about filing a return and one for customers
receiving a fourth notice about filing a return.If some of the uncoded calls in FY 2004 and
first quarter of FY 2005 related to these notices, TE/GE Division CAS function management
would not have a complete picture of the impact of these telephone inquiries on
TE/GE Division CAS toll-free call site operations. Calls
that are not coded for an issue could negatively affect TE/GE Division CAS function
management’s ability to identify trends, training needs, and systemic problems.

During FY 2004, the Pacific Consulting Group determined that
the TE/GE Division CAS function should work on two primary areas:

·Reduce
the amount of time it takes to complete a customer’s call once the customer
gets through to a TE/GE Division CAS function assistor.

·Improve
issue resolution.

We
determined that the time to complete a call is increasing and that customers
and TE/GE Division employees who administer the customer satisfaction survey
have different opinions about whether a customer’s issue was resolved by the
end of the telephone call.

The TE/GE Division contracts with the Pacific Consulting
Group to conduct customer satisfaction surveys.This research is part of the IRS agency-wide initiative to monitor and
improve taxpayer satisfaction with the service provided. Some of the objectives
of this study are to identify areas in which TE/GE Division CAS toll-free call
site staff and managers can improve customer service and to track progress in
improving customer satisfaction with TE/GE Division CAS toll-free call site
service.

In each quarter
of FY 2004, the consultant recommended the TE/GE Division CAS function focus
improvement on the time it takes to complete a customer’s call once the
customer gets through to an assistor.From National Quality Review System data for
TE/GE Division customer telephone inquiries reviewed during FY 2004, we
determined the average time for an assistor to gather information and respond
to the customer was 6.4 minutes.The
results from the first 4 months of FY 2005 showed telephone calls were
averaging much longer, with the average being 10.3 minutes compared to an
average of 7.1 minutes for the same period in FY 2004.

In addition, the consultant advised that TE/GE Division CAS
function management should strive to improve issue resolution.The customer and the TE/GE Division CAS
function quality analyst who monitors the call for quality control and sampling
purposes often hold different opinions about whether the issue is
resolved.These differing perspectives
can include instances where the customer thinks the issue is resolved, but the
monitor thinks it is not resolved, and instances where the customer thinks the
issue is not resolved, but the monitor thinks the issue is resolved.While data showed fewer customers disagreed
about issue resolution in the first quarter of FY 2005 when compared to any
quarter in FY 2004, the consultant continued to advise that TE/GE Division CAS function
management focus improvement on issue resolution.

Figure 2:Percentage
of Calls in Which Customer and Monitor Disagreed on Issue Resolution

Figure 2 was removed due to
its size.To see Figure 2, please go to
the Adobe PDF version of the report on the TIGTA Public Web Page.

The TE/GE Division CAS QA function reviews the customer satisfaction
survey and develops tips or ideas intended to improve customer
satisfaction.These tips are distributed
to TE/GE Division CAS function managers, and it is suggested by the QA function
that the tips be shared with CSRs.However, because the TE/GE Division CAS function does not have
established procedures for the use of customer satisfaction surveys and for
monitoring the survey results for any program improvements over time, the
managers are not required to take any actions regarding the suggested
tips.While the current process may
provide more awareness of service for which TE/GE Division customers are less
than satisfied, it may not result in improved customer satisfaction.We believe a more formal process, which
includes developing action plans to address issues raised in the customer
satisfaction surveys and monitoring the survey results over time, would provide
better assurance of increasing customer satisfaction.

The IRS Communications and Liaison Division developed a
guide entitled Using Customer
Satisfaction Survey Data to Develop Improvement Plans.This
guide describes a series of steps for this process, including facilitating a
group meeting to understand the data, determine priorities, consider
alternative solutions, and develop implementation plans to make better use of
customer satisfaction data.Another step
in this process is developing an action plan that is specific, measurable,
achievable, realistic, and timely.The action
plan should identify the steps to be taken to improve the customer service, the
person(s) responsible for implementing those steps, a timeline for completing
each action, and a method for monitoring whether the changes resulted in
improved customer satisfaction.A
process that includes a specific and measurable plan may enable TE/GE Division CAS
function management to focus on specific improvements to customer satisfaction
survey needs.

4.The
Director, CAS, TE/GE Division, should establish a coordinated process with the SOI
Division to compare the actual sample results to the sampling objectives shortly
after the sampling period has ended, to determine if the sample size should be
reevaluated for future periods.

Management’s
Response:The Director, CAS, TE/GE Division, will coordinate with the
SOI Divisionon
a monthly basis to compare the actual sample results to the sampling objectives
to determine if the sample needs to be adjusted (up or down) for the next
sampling period to stay within the 5 percent precision margin.

Management’s
Response:TE/GE Division CAS function managers will reemphasize the input of issue codes for use in establishing training
needs and for providing helpful feedback to other functions within the TE/GE
Division.If an employee’s issue code
input is low, the manager now provides written direction to code calls
appropriately.The managers receive and
review reports on the input of issue codes on a weekly basis.Managers are directed to discuss the results
of these reports with their employees, as needed.

Management’s
Response:The Director, CAS, TE/GE Division, has revised the scheduling of employee
direct time and implemented new menu options on the toll-free line to respond
to customer satisfaction results.As
an ongoing initiative, the TE/GE
Division CAS function forwards suggestions to the TE/GE Division Customer
Education and Outreach offices for topics or additional information to be put
on the web (irs.gov) for enhancing web usage and possibly reducing the call
volume, thereby improving customer satisfaction.The CAS uses customer satisfaction results
during the development of the annual training plan and during workshops.

A.Determined
whether TE/GE Division CAS function CSRs properly identified and addressed the
customer’s issue(s), including the total number of questions asked, the number
of questions answered correctly, and the number of questions answered
incorrectly.

B.Determined
whether TE/GE Division CAS function CSRs explained the process or actions taken
and confirmed that the customer understood the issue covered.

D.Reviewed
Data Collection Instruments and compared TE/GE Division CAS QA function
personnel determinations of whether the customers received accurate responses with
the results from the Treasury Inspector General for Tax Administration’s
(TIGTA) review of the same cases.

E.Determined
whether TE/GE Division CAS function CSRs identified themselves by name and
unique identifying number, as required by the Internal Revenue Service
Restructuring and Reform Act of 1998.[17]

2.Sufficient data were collected and analyzed to
determine the reason(s) for defect occurrence.

3.Sufficient data were collected and analyzed
to identify defect trends.

B.Interviewed TE/GE Division CAS function personnel
and reviewed applicable documentation of corrective actions initiated from the quality
assurance processfor FY 2004 and the first
quarter of FY 2005 to determine whether the actions have affected the accuracy
of responses.

C.Analyzed customer satisfaction surveys for FYs
2000 through 2004 to determine whether there were trends regarding the accuracy
of responses identified by the surveys and whether actions were taken as a
result of feedback from the surveys.

This appendix presents detailed information on the
measurable impact that our recommended corrective actions will have on tax
administration.This benefit will be
incorporated into our Semiannual Report to the Congress.

Type and Value of Outcome Measure:

·Reliability of Information – Actual; 6.13
percent difference between the Treasury Inspector General for Audit (TIGTA) and
Internal Revenue Service assessment of inaccurate or incomplete responses (see
page 4).

Methodology Used to Measure the Reported Benefit:

During November 2004 through January 2005, the Tax Exempt
and Government Entities (TE/GE) Division Customer Account Services (CAS)
Quality Assurance (QA) function reviewed a statistical sample of 149[18]
customer telephone inquiries for customer accuracy. We reviewed 134[19]
of these calls and compared our results with TE/GE Division CAS QA function
determinations of whether the customers received complete and accurate responses
to their inquiries.We identified five
additional TE/GE Division customers that did not receive a complete and
accurate response to their telephone inquiry.The five additional calls involved three Exempt Organizations (EO) function
customers inquiring about their tax-exempt status, one EO function customer
inquiring about what activities an organization can engage in prior to
receiving a formal determination of tax-exempt status, and one Employee Plans function
customer inquiring about abatement of a proposed penalty. The customer accuracy rate reported for this period
was overstated by approximately 6.1 percent (78.52 percent reported by the TE/GE
Division CAS QA function versus 72.39 percent determined by our review; see
Figure 1 on page 5). The customer accuracy rate is a key method used to
determine whether the TE/GE Division CAS toll-free call site is providing
quality service to customers.

During November 2004 through January 2005, we reviewed 148[20]
of the TE/GE Division customers’ telephone inquiries for opportunities for the
TE/GE Division CAS Customer Service Representatives (CSR) to provide enhanced
customer service. We determined that for
5 of the 148 (3.4 percent) telephone calls, the TE/GE Division CAS function assistors
provided accurate responses to customers but could have provided enhanced
service and reduced taxpayer burden.The
five telephone calls involved questions about how to become a tax-exempt organization
and when tax-deductible contributions could be received.The TE/GE Division CAS function assistors
could have provided enhanced service by more closely following published
guidance when explaining the process for applying for recognition of tax-exempt
status.

The TE/GE Division CAS QA function selected the sample of
telephone calls based on a schedule developed by the Internal Revenue Service
Statistics of Income Division to achieve a statistically valid sample.The sample was designed with a 90 percent
confidence level, a precision of +5 percent, and an expected error rate
not to exceed 10 percent.

We projected the 3.4 percent of calls for
which enhanced service could have been provided to the population of telephone
calls answered by TE/GE Division CAS function assistors during this period
(137,763) and determined the range of customers who were calling about becoming
a tax-exempt organization.Based on the
results of our sample, we estimate the TE/GE Division CAS function assistors
could have provided enhanced service to these customers.

We determined the number of customers affected
by using the United States Army Audit Agency Statistical Analysis System
formula for sample precision.Based upon
our sample size of 148, from a population of 137,763, we estimate that 4,655 customers
(3.3784 percent) could have received enhanced service if the TE/GE Division CAS
function assistors had more closely followed published guidance when explaining
the process for applying for recognition of tax-exempt status.

[4]Toll-free call site quality is the percentage of
customers receiving accurate responses to their questions.Evaluation of accuracy measures
administrative accuracy (internal) and customer satisfaction (external).

[5] The
Aspect Automated Call Distributor’s primary purpose is to direct calls from taxpayers to IRS CSRs for
assistance.

[6] The
total number of calls reviewed was 163 total calls minus 14 calls that were
transferred to another IRS division which are not used in calculating customer
accuracy rates.

[7]
Percentages were rounded to two decimal places.Actual values were used in computing the estimated number of incorrect
or incomplete responses.

[8] There
were 137,763 TE/GE Division customer telephone inquiries answered during this
period.

[9] The
TE/GE Division CAS function confidence level is 90 percent and the sampling
error is ±5.53 percent.Sampling error is the number of errors that occur because only part of the
population is directly contacted.

[10] The
total number of calls reviewed by the TIGTA was 134 (163 calls minus 15
recordings that were not available at the time of our review and 14 transferred
calls not used in calculating customer accuracy rates).The percentage of incorrect responses was
calculated by dividing the number of incorrect responses identified by the TIGTA
(37) by the total number of calls reviewed by the TIGTA (134).

[12]There are three key components for an
organization to be exempt from Federal income tax under I.R.C. § 501(c)(3) (2004).
A not‑for‑profit (i.e.,
nonprofit) organization must be organized and operated exclusively for one or
more exempt purposes, the most common of which are charitable, educational, and
religious.

[13] There
is an additional 12-month extension available for filing a Form 1023.

[15]Improvements
to the Tax Exempt and Government Entities Division’s Telephone Operation Would
Enhance Customer Service (Reference
Number 2000-10-091, dated June 2000).

[16] The
total number of calls included in the TE/GE Division CAS QA function
calculation of the customer telephone inquiry accuracy rate was 149 (163 total
calls reviewed minus 14 calls that were transferred to another Internal Revenue
Service division).The Treasury
Inspector General for Tax Administration review included the 14 calls and
determined that the transfer and the QA function’s review of these calls were in
accordance with CAS procedures.The
total number of calls included in our calculation was 134 (163 total calls
minus 14 transferred calls and 15 recordings that were not available at the
time of our review).There were 137,763
TE/GE Division customer telephone inquiries answered during this period.

[18] The
total number of calls included in the TE/GE Division CAS QA function
calculation of the customer telephone accuracy rate was 149 (163 total calls
reviewed minus 14 calls that were transferred to another IRS division which are
not used in calculating customer accuracy rates).There were 137,763 TE/GE Division customer
telephone inquiries answered during this period.

[19] The
total number of calls reviewed by the TIGTA to calculate the customer accuracy
rate was 134 (163 calls minus 15 recordings that were not available at the time
of our review and 14 transferred calls not used in calculating customer
accuracy rates).

[20] The
total number of calls reviewed by the TIGTA for opportunities for enhanced
service was 148 (163 calls minus 15 recordings that were not available at the
time of our review).